Manufacturers Forecast Renewed Market Confidence

To help improve the service and operation of its aircraft, Embraer held executive jet operators’ conferences­–in India, for Phenom 100 and 300 users, and in Abu Dhabi, for those flying the Legacy 600 and 650 (pictured) and Lineage 1000.

As the business aircraft market continues to recover from the industry downturn, AIN took a look at recent forecasts from manufacturers as to where growth may be heading and the factors that are likely to affect it most.

Bombardier Aerospace sees indicators that are “mixed, yet trending positively.” New aircraft orders are supported by continued demand from developed markets and growth potential in emerging markets, which are forecast to play an increasingly important global role.

The company is confident in the “strong, long-term potential” of the industry and foresees a worldwide requirement for some 24,000 such deliveries valued at almost $650 billion during 2012-31 in the “light, medium and large” business-aircraft market sectors in which it competes; it does not manufacture very light jets or large corporate airliners. Bombardier’s forecast anticipates 9,800 aircraft deliveries worth $266 billion from 2012 to 2021, and 14,200 shipments valued at $382 billion in the following 10 years.

While markets recover, current indicators remain mixed, said the Canadian manufacturer. “Market confidence needs to be fully restored for deliveries to increase strongly and enable the industry to realize its full potential.”

Bombardier expects deliveries to lag new orders as the industry tries hard to maintain acceptable backlog levels. Accordingly, this year’s deliveries likely will be comparable to those of 2011. But the company is optimistic that business jet deliveries will return to “sustained growth, starting in 2013,” with the large-aircraft sector demonstrating the fastest expansion.

MEA Prospects Rising

Considering market prospects here in the Middle East, the manufacturer forecasts requirements for 410 new business jet deliveries during 2012-21 and 775 in the following 10 years. It sees the combined Middle East and Africa sector enjoying a continuing rise in “business jet penetration,” a concept that takes into account 1960-2031 trends (actual and forecast) in fleet size and gross domestic product when compared with population growth profiles.

The company expects key growth markets, including Brazil, India, Russia and the Commonwealth of Independent States, Indonesia, Mexico, South Korea and Turkey, to receive a “significant share” of business jet deliveries in the period.

South American competitor Embraer has yet to publish a new market forecast, but has said that the region encompassing the Middle East, Asia and Europe will account for a third of new executive jet revenues during this decade. Its current document, published last year, foresees this region accounting for some $70 billion worth of business as manufacturers deliver an overall total of 10,000 new machines globally during 2011-20. Fifty percent of the worldwide shipments will involve entry-level, light and mid-light aircraft that will represent 19 percent of the 10-year market by value.

In October, the Brazilian manufacturer held briefings for its Phenom, Legacy and Lineage customers at two executive jet operators’ conferences (EOCs). Bangalore in India hosted a meeting for Phenom 100 and 300 users, while those flying the larger Legacy 600 and 650 and Lineage 1000 designs met in Abu Dhabi.

Both groups received technical, maintenance and flight operations updates during interactive “workshops” and panel sessions. “As our executive jet family of operators grows, it is increasingly important to maintain close relationships,” said Embraer Executive Jets Asia/Pacific customer support and services director André Luis Vieira de Sousa. “It is one of the most important ways we communicate, because face-to-face meetings help improve the service and operation of our aircraft.”

Such EOCs are “a key tool for us to receive feedback,” said Pedro Paiva, de Souza’s opposite number for Europe, Middle East and Africa. “It is critical to helping us define processes and ‘solutions’ for the growing number of operators and is one of the most important opportunities for customers, operators, service centers and Embraer teams to exchange information and gather ideas.”

China Foresees Growth

Earlier this year, at the 2012 Asian Business Aviation Conference & Exhibition (ABACE) at Shanghai’s Hongqiao International Airport, Embraer China president Guan Dongyuan said, “We expect the worldwide executive jet market to experience sustained growth between now and 2021.” This included an outlook for the local Chinese market for 635 business jets worth $21 billion. More than 500 Embraer executive jets are operating worldwide.

Meanwhile, in its annual global business aviation outlook unveiled in October, Honeywell­–the avionics, engines, and aerospace systems and services provider–. The company’s soothsayers predict deliveries of nearly 10,000 new business jets worth $250 billion during 2012-22, an increase of 9 percent over last year’s expectation of 10-year shipments.

They suggest that 30 percent of buyers plan to replace or purchase new aircraft in the next five years, with Brazil, Russia, India and China–the so-called BRIC countries–leading the way. Large-cabin jets are seen as accounting for more than 40 percent of planned new acquisitions, while market surveys suggest “continued modest growth over the next two to three years.”

Earlier this year, Honeywell’s annual examination of the helicopter market concluded that worldwide purchases would “hold steady in the near term,” with 4,700 to 5,200 new civil aircraft being acquired during 2011-16. Two thirds of requirements are expected to cover light single- and twin-engine models as Asian purchase plans improve and those in the U.S. and Europe soften.

Honeywell’s expected growth rate figures for business aircraft deliveries come from “pricing increases and a change in expected business jet mix,” as customers continue to acquire larger models. This year, the company forecasts delivery of about 680 to 720 new units, a single-digit increase over levels suggested 12 months ago.

“Next year’s totals are anticipated to be of similar magnitude, reflecting the protracted nature of the global economic recovery,” said Honeywell Business and General Aviation president Rob Wilson. “Over the medium term, a return to historical growth conditions supported by globalization, wealth creation in developing nations and new aircraft development should boost orders and support accelerated growth beginning mid-decade.” Despite the economic challenges the industry has faced for more than three years, he said, “we believe some progress is being made.”

Requirements for new business aircraft in this region and neighboring markets to the southwest are seen as essentially stable, according to the company. “The share of projected five-year global demand attributed to the Middle East and Africa remain near the center of its historical 4 to 7 percent range,” it said.

Some 32 percent of survey respondents plan to buy a business jet, down from the 38 percent recorded last year. Despite this reduction, the proportion planning to expand their fleets rather than simply replace an aging aircraft almost doubled in the past 12 months. “Operators in the region shared direct candid [survey] responses indicating their purchases may happen further into the next five-year time frame, potentially influenced by recent political uncertainties,” concluded Honeywell.

On the rotorcraft front, survey results suggest that the region does not display the same enthusiasm as the Western World does to purchase new smaller models in the coming five years. “Light single-engine helicopters had the highest concentration of regional purchase interest in the Americas, while purchase interest was lower in Europe, Asia, the Middle East and Africa,” said Honeywell.

Nevertheless, there is more interest in acquisition of larger units, according to Honeywell analysts. “The highest concentrations of demand for medium-twin [helicopters] were measured in the Middle East/Africa, Asia and Latin America. Between 40 percent and 50 percent of all [references by] make/model in Asia and Middle East/Africa were for medium twins.”

The survey found that just over one quarter (26 percent) of Middle East/Africa operators surveyed planned to fly more hours this year than in 2011, with 4 percent expecting lower use. The Latin American region reported the highest average use last year. In a reversal of 2010 activity levels, reduced average use by Middle Eastern/African operators in 2011 is thought to have reflected the recent period of political instability in the region.